PF Chang’s China Bistro Inc, the largest US full-service Asian restaurant operator, has agreed to a takeover by private equity firm Centerbridge Partners LP for $1.1 billion.
PF Chang’s accepted the deal after four quarters of slumping sales, where the chain had difficulty competing against competitors that offer both quality food items and low prices.
In 2011, the chain attempted to pass along rising food and labor costs to customers by raising prices, a strategy that drove customers away. In another attempt earlier this year, PF Chang’s introduced a new lunch menu with items priced under $10 in an effort to attract more customers.
PF Chang’s China Bistro was founded by Paul Fleming and Philip Chiang with the goal of offering affordable Asian cuisine with a Western flair. The company owns nearly 400 restaurants, including PF Chang’s restaurants in 39 states and Pei Wei restaurants in 23 states.
CEO Richard Federico says: "Being a private company will provide us with greater flexibility to focus on our long-term strategic plan of elevating our guest experience, enhancing our value proposition, growing traffic and improving the performance of our brands.”
The deal has already been approved by the food chain’s board of directors, but still needs to be approved by anti-trust officials. It is expected to close by the end of the third quarter.
Restaurant Chains Attracting Investors
Centerbridge’s takeover of PF Chang’s is the latest in a chain of recent restaurant acquisitions. Private investors are attracted to restaurant chains because the brands can benefit from expansion or cost cutting, and ready cash flow makes financing deals easy.
This is the largest acquisition since Burger King Worldwide Holdings Inc. was purchased in 2010 for $3.3 billion. In 2011 both Arby’s Restaurant Group Inc. and California Pizza Kitchen were purchased by investors.
Key Statistics - Fast Food Industry in the US (source: MarketLine)
- In 2011, the fast food market in the US generated revenue totaling over $82 billion. For the time frame 2007-2011, this represents a compound annual growth rate (CAGR) of 3%.
- For the time frame 2007-2011, it was predicted market consumption volumes would increase with a CAGR of 4%. In 2011, transactions reached a total of 45.6 billion.
- For the five-year period 2011–2016, market performance is expected to decelerate with a CAGR of nearly 3% is anticipated. By the end of 2016, the market is expected to be worth close to $94 billion.